VW set to buy Zastava?

Serbia’s state-owned carmaker, Zastava, which once sold cars in the UK under the Yugo brand, could be bought by Volkswagen. Representatives from the German company visited the Zastava factory before Easter to assess its suitability for purchase. The Serbian Government, which owns 99.9 per cent of the car maker, has already made clear it intends to privatise it.Zastava has a huge factory in Kragujevac, which once produced 250,000 cars a year but is expected to build just 18,600 this year, split between its own ancient models (one of which is based on the 1969 Fiat 128) and licence-produced versions of the previous generations of the Fiat Punto and Opel Astra.Western car makers are interested in the facility because it has the size and potential to build serious volumes of cars. The factory is in poor condition, but Zastava has a trained workforce of around 5000 and plenty of car-building and engineering experience. However, this workforce is also heavily unionised, reducing their attractiveness to external car makers when compared with the creation of a brand-new, plant – as has happened with numerous new factories in Poland, Hungary, Slovakia and the Czech Republic. If Volkswagen does take over Zastava it could prove integral to rumoured plans to migrate manufacture from the company’s German factories – something that is already causing a major debate within Germany. Fiat, Tata and Chinese maker FAW are also interested in Zastava but GM has reportedly pulled out of talks. The deadline for bids is April 15.